Opening the e-door for industry

February 16, 2000|By Jerry J. Jasinowski

WASHINGTON -- In a smart move -- taken none too soon -- the Commerce Department recently announced that it would begin following the impact of electronic commerce on the broader economy.

We will start surveying tens of thousands of manufacturers over the next few months, asking how much they acquire and sell over the Internet, said Commerce Secretary Bill Daley.

A recent study by GartnerGroup estimates that business-to-business (B2B) e-commerce will skyrocket from about $145 billion in 1999 to $7.3 trillion in 2004, accounting for seven percent of all sales transactions around the world.

B2B Internet commerce is generally defined as company to company communications and transactions -- marketing, product refinement based on electronic data sharing, employee training and education, and the online purchase of goods and services. This is the heart of the real story of Internet commerce: How transformation of companies as they work with one another online.

The influence of high technology has transformed the modern manufacturing corporation.

As of 1998, 84 percent of manufacturers nationwide were using computer-aided design and about 60 percent were using local area networks and just in time delivery processes. And in a recent NAM survey, 80 percent of manufacturers surveyed said they have Web sites, as opposed to 20 percent of all U.S. businesses.

Manufacturing contributes about one-third to Americas long-term economic growth. About 65 percent of this come from advances in technology.

Industry performs about three-quarters of the nations research and development. So it shouldnt be surprising that over the past decade, manufacturing productivity has been nearly 4 percent annually and 4.4 percent from 1996 through 1998, double every other economic sector.

This surge in productivity is attributable to technological advance. Or, to put it more simply, manufacturing has entered a fundamentally new era as technology has transformed the factory floor. And nowhere is the promise of technology more evident than in electronic commerce.

Why are businesses accessing the Web so eagerly? Use of the Internet transforms the nature of corporate commerce -- how companies communicate with and buy and sell to one another in a seamless, uninterrupted manner.

E-commerce is vastly more efficient in terms of time, money and labor-use than traditional models of commerce. As a result, as IBM Chairman Lewis V. Gerstner Jr. is quoted as saying in the

cf03 Wall Street Journal,

cf01 the Internet is the ultimate medium for business. To underscore his point, Mr. Gerstner estimates that 25 percent of IBMs revenue is being generated by electronic-related commerce.

The Internet allows vendor companies to find out about their customers needs, thereby enabling them to better serve their clients. The

cf03 Wall Street Journal

cf01 has noted that the Dana Co., an automotive supplier with annual revenues of $12.5 billion, uses the Internet to review the quality of its products as they are actually used by companies like DaimlerChrysler. The benefits are clear: product improvement and a healthy supplier-to-customer relationship -- all due to electronic commerce.

Similarly, new Internet innovations will continue to improve corporate and support processes. In a recent survey conducted by the Deloitte Consulting firm, 41 percent of U.S.-focused companies responding to the survey said they have instituted electronic-based procurement. And almost 70 percent of the surveys respondents said that their key suppliers are ready to work with them via the Internet.

Internet commerce also saves money for firms in a host of ways, providing substantial internal efficiencies. Electronic information transfers save companies from having to rely on paper communications, thereby reducing costs significantly.

In global terms, the Giga Information Group estimates that Internet commerce will save companies $1.25 trillion by 2002, with the U.S. accounting for half of this amount.

Giga calculates that within three years, U.S. firms will gain a profit increase of between $360 billion and $480 billion as a result of savings accrued through e-commerce. Giga also says that annual cost savings for U.S. firms will be more than $600 billion every year by 2002.

Sustaining Americas remarkable global leadership in growth, productivity and technology must be a national priority. Manufacturers have a huge stake in Americas technological success. Technology is the single biggest contributor to U.S. economic growth, and manufacturing is the single biggest contributor to technology.

And thats good news as we work to compete in the international marketplace.

Jerry J. Jasinowski, president of the National Association of Manufacturers, wrote this article for Knight Ridder/Tribune News Service.

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